Proof of Funds Letters So You Can Get Under Contract Quickly
At JCREIG Capital Funding, we understand the importance of having a reliable proof of funds (POF) when navigating real estate transactions. Our proof of funds service is designed to provide you with the documentation you need to demonstrate your financial capability to sellers, agents, and other stakeholders.
Are you familiar with proof of funds letters? These documents certify how much money you have available to use toward your real estate investment purchase. In many real estate transactions, you would get a proof of funds letter from your bank, which confirms to the seller that you have the necessary funding available. However, when you work with JCREIG Capital Funding, you get your proof of funds letter from us because we provide the funding you need for your property investments.
What Is a Proof of Funds Letter?
What is proof of funds? It’s exactly what it sounds like — proof that you have the amount of money you say you have. Proof of funds in real estate is a document that shows how much money you have available to purchase a home. Sellers typically like to see proof of funds letters, also known as verification of funds letters, to ensure you can cover the costs associated with obtaining a mortgage, such as down payment and closing costs.
If you’re lucky enough to be able to pay for a house in cash, the proof of funds letter will ensure sellers that you have enough money to cover all the costs of the home. Alternatively, if you’re in a competitive market where you’re trying to beat out cash offers or get into a bidding war, a proof of funds letter can help a seller feel more confident about your offer.
PoF letters typically come from banks or other financial institutions and include essential information, such as:
- Bank name and address
- Official bank statements
- Balance of accounts
- Signature of authorized bank employee or notary
- Date of the proof of funds letter
Verification of funds letters come in a few different forms, with the most common being bank statements. However, certified financial statements may qualify depending on the seller. In most cases, you’ll need a letter from your bank or credit union that states the amount of liquid funds you have available to purchase a home.
An official bank statement is the most common type of PoF letter and allows you to verify how much money you have available to purchase a home. In most cases, you can get your bank statement PoF online or request a copy of your bank statements be mailed to you.
Why Request a Proof of Funds Letter?
- Credibility: Strengthen your position as a serious buyer with verified financial backing.
- Speed: Expedite the purchase process with quick and efficient proof of funds documentation.
- Confidence: Enhance trust with sellers and agents, increasing your chances of securing the property you desire.
How It Works?
Submit Your Request: Complete our simple online form with your details and requirements.
Review and Verification: Our team will review your request and verify the necessary information.
Receive Your POF Letter: Once approved, you will receive your proof of funds letter promptly, ready to present to sellers and agents.
Ready to Take The First Step?
A Proof Of Funds Letter Can Help You Push Your Real Estate Investment Through Faster and Beat Out The Competition
Why You Might Need a Proof of Funds Letter
We’ve already discussed why a proof of funds letter is important when you’re shopping for a home. However, it’s not just the seller who may require you to have one. Lenders may require a PoF letter for one or more reasons, including:
- Proof you can repay the loan: A proof of funds letter ensures lenders that you have enough money in your bank account to afford the down payment and closing costs associated with the home loan.
- Proof you can cover the remaining costs of the home: In some cases, you might opt to take out a lesser loan amount if you can afford to pay for the home using cash. If you decide to take out a home loan, you must ensure the lender that you can cover the remaining costs of the home in cash.
- Proof of down payment: A proof of funds letter ensures lenders that you can afford the down payment, making you look like a more appealing borrower.
- First-time home buyer: Loans for first-time home buyers may require you to provide a PoF letter to the lender to ensure you can cover the down payment and potential private mortgage insurance (PMI) costs.
Not all lenders require PoF letters, especially if you’re applying for a bank statement loan. In most cases, lenders will already review your bank accounts to determine your income. Still, it’s a good idea to have a PoF letter to give you more purchasing power when shopping for homes.
Proof of Funds Letter vs. Preapproval Letter
Proof of funds in real estate can give sellers a reason to take the home off the market and sign a purchase agreement. However, it’s important to note that a PoF letter differs from a mortgage preapproval letter.
The mortgage preapproval letter is a document from a lender that tells sellers you can obtain a loan when you’re ready to purchase a house. Conversely, a proof of funds letter tells sellers that you have the means to purchase a home.
JCREIG Capital Funding
Looking to finance your next investment project?
JCREIG Capital Funding is a hard money lender that can help you fund your loan.
We have over a decade of experience, and have funded hundreds of millions of dollars in private money loans for commercial and residential real estate projects across The Sunshine State.
Reach out to us @ 561-303-0334 if you require funding or have any questions.
FAQs
Once a property is listed for sale, the seller wants to attract as many potential buyers as possible to increase the chances of it selling quickly. They’ll not want to do anything that will jeopardize that action taking place. As they are fielding queries about that listing, one of the most important things they’ll be asked is about the availability of the property. They’re only going to want to have to tell people it is under contract if they’re relatively sure of the buyer. And that is where the verification of funds letter comes into play.
A seller is not going to want to turn away interested parties unless they feel good about any offer they may have accepted. One of the most important aspects of that is being assured that the buyer will have the money to complete the purchase. And that is where a proof of funds letter comes into play.
A seller wants something other than a promise and a smile from the buyer. A properly worded verification of funds letter will give the seller the confidence to put their property under contract.
When it comes to real estate investing, knowing how to properly word your proof of funds letters is crucial to gaining sellers’ confidence and trust.
This type of POF (Proof of Funds) differs from the kind you would get if you were trying to get a mortgage.
No. A proof of funds letter and preapproval are two separate things. A POF letter states that the money is available for the property purchase should specific criteria be met. That is something that you need to understand. When you download a POF from JCREIG Capital Funding, we’re not approving a loan and we’re not even saying that the deal you are pursuing is a good deal. Real estate investment revolves heavily around you researching to decide that a property is worth pursuing. A verification of funds letter gives the property seller enough confidence to allow you access to the property in order for you to complete your due diligence. They’re not going to let just anyone send in appraisers, contractors, and inspectors. But those are the next steps you’ll need to take in order to determine whether or not the deal has a good chance of being profitable.
A pre-approval letter is not the same thing.
An important component of real estate investing success is timing. Finding the right property owned by a motivated seller is one aspect of that. And those motivated sellers want to know that if they accept your offer that you’ll be able to follow up so that they don’t lose valuable time or other potential buyers.
Requirements regarding the recency of your proof of funds statements can vary depending on their purpose. Often, sellers want to see proof of funds letters that are less than 90 days old. Lenders, however, may want to see statements from within 30 days.
A proof of funds letter doesn’t typically need to be notified, but it should have a valid signature from your financial institution.
Proof of funds in real estate can give sellers a reason to take the home off the market and sign a purchase agreement. However, it’s important to note that a PoF letter differs from a mortgage preapproval letter.
The mortgage preapproval letter is a document from a lender that tells sellers you can obtain a loan when you’re ready to purchase a house. Conversely, a proof of funds letter tells sellers that you have the means to purchase a home.
When you buy a house, you may need proof of funds and proof of deposit. The proof of deposit letter verifies that you’ve made a down payment on a home loan. Proof of deposit letters are given to the lender so they can see that you have the money for a down payment on a particular property. It also helps them determine where the deposit came from.
For example, if your deposit was a gift or acquired through other loans, your lender can decide whether or not you have a reliable income to afford the loan. Of course, you can use a gift for a down payment if it comes from a family member or someone close to you. If you plan on using a gift as part of your down payment, you’ll need to provide a gift letter to your lender to assure them that the gift was not a loan.
The proof of deposit can help demonstrate a borrower’s ability to repay. In addition, if the deposit comes from a reliable source, such as a savings account, it can demonstrate the reliability of their income, which can make it easier for them to get approved for a mortgage.
Simply put, a proof of funds letter is for the seller to ensure you can afford to purchase a home, while a proof of deposit letter is for the lender to ensure you have a large enough down payment and that it came from a reliable source.
JCREIG Capital Funding WANTS to fund your deal!
Once you’ve determined it is time to move forward, you can fill out a funding application and schedule an appointment to discuss the viability of your deal and proceeding with the evaluation and funding. If you want to speak with a member of our team before getting the property under contract, we can discuss some options with you.
Clients with a property under contract can run numbers with a member of our funding team to determine whether or not to proceed with a deal, conduct more due diligence, and walk through with your contractor. Because we are experienced in Fix & Flip, Fix & Rent investments and land flipping, we can guide you in ways that another lender cannot. Getting a proof of funds letter from a lender specializing in funding for new investors is also helpful. In working with thousands of beginning flippers, we have come to recognize common mistakes that first-timers make.
